Indian Prime Minister Manmohan Singh is scheduled to meet with President Obama on Friday, September 27, at the White House. Ashley J. Tellis and Milan Vaishnav discussed topics likely to come up in the bilateral meeting between the two leaders, including the landmark India-U.S. civil nuclear deal, enhancing defense cooperation, and strengthening trade, investment, and economic collaboration.
TOM CARVER: Good morning, everyone, if you’re in this time zone, and good afternoon if you’re in India, or evening rather. This is Tom Carver here. I’m vice president for communications and strategy at Carnegie Endowment, and this is a 30-minute media conference call on Prime Minister Singh’s visit to the United States.
I’m pleased to have two of our popular scholars on India with me today. On the line from Europe is Ashley Tellis, who will be familiar to many of you. Ashley has been at Carnegie for several years, before that had a very prominent career in the U.S. government, worked as national – in the National Security Council staff and as an advisor to the U.S. Embassy in New Delhi, and then before that was professor for political policy analysis at RAND.
And then with me here in Carnegie is Milan Vaishnav, who joined us a year-and-a-half ago, two years ago, from the Center for Global Development, and we’re grateful to have him. And he works on the political economy issues of India, particularly corruption and governments and politics. So this is a call that is on the record. Transcripts will be available shortly afterwards. I’d ask you please to identify yourself if you have a question. And so let’s start. I’ll just maybe just throw it open to the two of you first for some opening comments. Maybe, Ashley, can you give us your thoughts on what’s likely to come out of the prime minister’s visit to America?
ASHLEY TELLIS: Sure, Tom. Thanks. I think for the prime minister this was about cementing a legacy. As, you know, as all of us know, he spent a great deal of political capital in his first term trying to conclude the Civil Nuclear Cooperation Agreement, and that has run into rough waters, you know, since. And I think what he was trying to do during this visit is bring some measure of good news either in the form of an actual early works agreement or an announcement that an early works agreement is on the anvil.
He’ll also try and tie up, you know, some other outstanding business like, for example, pushing forward on the Defense Technology Initiative that his national security advisor and the deputy secretary of defense, Ash Carter, have been working on for the last several months. There are issues of trade; there are issues of climate change, issues of energy. You know, these are all staples of the U.S. in their discussion now for the better part of the decade.
And I think what he wants to do is to come to Washington and tie a ribbon on some of these issues, leaving the imprint that this is part of his legacy; this is what he has achieved, you know, in the years that he has been in office. So I think that is pretty much, you know, his reason for coming to Washington at this point in the months leading up to the election.
MR. CARVER: Milan, do you want to add anything to that?
MILAN VAISHNAV: Yeah, I think I’d largely agree with that. I mean, I think with the sinking economy in India and elections on the horizon, national elections in 2014, U.S.-India relations in some way represent sort of a bright spot on the current government’s record. And I think the prime minister very much wants to cement his legacy. Although it seems like ancient history, Singh’s sort of shift towards America was really the kind of lynchpin of his first term as prime minister, and he literally risked his government in 2008 with the parliamentary no-confidence vote over the U.S.-India Civil Nuclear Cooperation bill.
There’s still a great deal of support for closer ties with the United States on the part of the Indian public, although there are still pockets of anti- sort of Americanism, anti-imperialism among parts of the intelligentsia. But I think what’s interesting is since Singh’s last visit there’s been a bit of a role reversal. When he was here last, the Indian economy was riding high and it was the U.S. economy that was faltering. And now it seems as if the tables have turned and the prime minister and the government is obviously looking towards elections, national elections next year and four critical state elections this fall, and wanting to really kind of bolster their record. And I think they see this area as largely a good news story for them.
MR. CARVER: You mentioned the elections. Now, this is for the lower house, right, and the mandate of that runs out around May, correct? At some stage between now and May there will be elections. Do we know that Singh will stand again, and will he run? And what – give us a quick take on what you see with the election.
MR. VAISHNAV: Sure. So, I mean, it’s very clear with the opposition, the Bharatiya – the party, the BJP has formally projected the Chief Minister of Gujarat Narendra Modi as its prime ministerial candidate for 2014. And he is off now on a whirlwind tour of giving – addressing big rallies and speeches. In contrast, the Congress Party has not projected anyone as its prime ministerial candidate, and in fact has hinted that it has no plans to do so. And so it’s basically left a bit of ambiguity there.
Singh has said that he neither rules in nor rules out a third try as prime minister. I think most people think that it’s unlikely given his age and given the fact that he’s held this position now since 2004. And the anticipated sort of heir to the throne is Rahul Gandhi, the son of the Congress Party president, Sonia Gandhi, but he has to this date been reluctant to accept the mantle of leadership. And while he will be the face of the party with respect to the campaign, there is no clarity thus far that he will be the prime ministerial choice should this government come back to power.
MR. CARVER: But we could surely expect Singh to stay as prime minister until the election.
MR. VAISHNAV: Yeah, there’s no indication that they would get rid of Singh before the elections were to happen, though.
MR. CARVER: OK.
OK, let’s throw it open to anyone who wants to ask questions. Does anyone have any that they want to ask either Ashley or Milan?
Q: Hi, this is Steve – (off mic). Just on the subject of the election, if you talk to U.S. officials they say – (off mic) – policy is laying down this long-term – (off mic) – relations between the two countries – (off mic) – and continues – (off mic) – in India. But if the BJP were to form the next government, what implications would that have for U.S.0-India relations, and would a government led by Modi, for example, pursue a similar sort of tack towards the U.S. as Prime Minister Singh has?
MR. CARVER: Ashley, do you want to take a crack at that first?
MR. TELLIS: Yes, let me just – you know, because there was a bit of a garble there, I want to make certain that I understood the question.
MR. CARVER: The question is, if you get a BJP government with Mr. Modi at the helm, what would that mean for U.S.-India relations? Is that – is that the gist of the question?
Q: Yeah, that was the question. Yeah.
MR. TELLIS: OK, I think there will be – nothing is going to fundamentally change if Mr. Modi becomes prime minister. In fact, there is every likelihood that the relationship might even become deeper than it is today.
You know, a quick two seconds of history here. The transformation of the relationship really took place during the term of the India government. That was the government led by Prime Minister Vajpayee. That was Prime Minister Singh’s predecessor. And Prime Minister Singh was in many ways the beneficiary of that transformation that took place between 1998 and 2004. And I expect that if the BJP comes back into office, they will really continue that tradition, because in many ways the BJP view of the United States is actually just as favorable as that held by Prime Minister Singh, if not more favorable. So I don’t see any particular impediment, if there is a BJP government in office, for the bilateral relationship.
MR. VAISHNAV: I mean, I obviously think the issue of Narendra Modi is a delicate one for the U.S. government, given that he has not been able to enter into the United States because of his – the reputation of – (inaudible).
However, if you speak with U.S. government officials, what they tell you privately is that is their posture currently, but if he were to become prime minister that that would be an entirely different ball game, and that they seem quite prepared to work with him, as they would with any future prime minister of any party. So they’re clearly making a distinction between Modi, where he stands right now, and where he would sit if he were to form the next government.
Q: This is Jayant Baranwal of SP Guide Publications. My question is, what are the steps the United States is taking towards creating concrete synergies between the world’s two largest democracies?
MR. TELLIS: Right. The short answer to that is to look at the character of the engagement that has been put in place now over the last 10-odd years. There is a huge agenda that the two countries are working on in the context of the strategic dialogue.
The strategic dialogue is this umbrella that covers strategic cooperation, defense cooperation, cooperation on energy, cooperation on science and technology, cooperation in education, cooperation on climate. I mean, the list is literally endless. And both sides have working on reconciling policy –
MR. TELLIS: OK, I was saying that both countries are working first on reconciling policies. And then second, there are concrete initiatives that both sides are pursuing under each – you know, in each of these issue areas. And so when one talks of synergies between the two countries, I think the one thing that has certainly changed when one thinks of the relationship prior to 1998 is that today both countries are pursuing a cooperation agenda that is actually really far too detailed to kind of list.
And, you know, I would just recommend you go to any of the fact sheets that have been published in the last several years and you’ll get – you will get an extraordinary, you know, agenda for where cooperation is taking place.
Q: OK. And at that point I wanted to ask, how does the U.S. see the nuclear capability of India now – a quick review.
MR. TELLIS: When you say “nuclear capability,” are you talking of civilian nuclear energy or are you talking of nuclear weapons?
MR. TELLIS: Well, on the civil nuclear energy side, I think the U.S. recognizes that India has placed a priority on increasing the share of nuclear energy as part of its total energy mix. And the U.S. has reported that and is looking forward really to concluding, you know, the promise of the civil nuclear agreement to make that happen.
On the nuclear weapons issue, the U.S. has been silent because as a matter of rule we don’t comment on the nuclear weapons capabilities of other countries. But as – you know, as a – as a practical matter, the U.S. has reconciled itself to the fact that India has nuclear weapons, and today this administration in particular is far more focused on nuclear security rather than on the weaponry itself.
Q: OK, this is Niharika from the Wall Street Journal. I have two questions. One is about the civil nuclear agreement. The cabinet – the Indian cabinet gave the go-ahead for the “pre-works” agreement. Assuming some version of that goes through with the house, what are the next steps? What happens next and how long is that expected to take?
And my second question is about defense guidance. Ashley, you mentioned briefly that defense is something that’s going to come up at this meeting. Are we expecting any specific agreements or specific deals to go through? And in general, what is the importance of defense ties in India-U.S. relations, particularly since India still remains wary of sort of being seen as too much in bed with the United States?
MR. TELLIS: OK. Let me take each of those in sequence quickly. On civil nuclear, assuming that the prime minister announces the conclusion of an Early Works agreement during this visit, then the next step is to actually negotiate the formal contract between Westinghouse and NPCIL for the two (sites ?) that have been allocated to the United States. That will take, in my view, a long time, because that agreement will have to confront what is the single biggest impediment to the conclusion of the contract, which is the nuclear liability bill.
Now, India has promised that the liability bill will be – contain liability, that there will actually be a dollar limit on the amount of liability that Westinghouse will be responsible for, and that that will be made quite clear during the contractual obligations. So there will be no open-ended liability as American corporations currently fear.
Now, whether that promise is borne out really, you know, will have to be determined by lawyers on both sides, but that process, I think, will take several months before that is concluded. On the defense side, I think – I don’t think there will be announcements during this visit – and now, defense comes in two parts. There are conclusion of contracts for defense purchases, and those are ongoing. I don’t expect the prime minister will come here and make an announcement about concluded contracts, but you know, the defense business has been going on – very, very impressively in the last decade. I expect that will continue.
There may be, however, a statement or something to the effect of both sides committing themselves to the defense technology partnership, and I think that is a very welcome development, because that takes both countries beyond simply contracting for purchases into the realm of coproduction and codevelopment. Now, that is something that – (inaudible) – and Ash Carter have been working upon, you know, during the last few months, and I think that is really a new area for both countries and important to both countries, and that is something that India really wants. I don’t think that’s something India is afraid of. They want to move beyond simply a supplier relationship into actually being able to develop weapons systems with the United States and do research and development together, so that’s a very positive thing, and I expect something to that effect, you know, being announced during this visit.
Q: On the civil nuclear front, you just said the Early Works agreement – you said the later agreement will deal with the contentious issue of nuclear liability. So the early works agreement doesn’t tackle that at all. It’s just an agreement to agree?
MR. TELLIS: That is correct, but there is – it’s more than just an agreement to agree. It actually is an agreement that will lay out a set of steps that both sides have to take that will be a recognition of what the costs of the contract will entail and so on and so forth. Then, the contract to come will be the formal document that will specify what the division of work between the two sides is going to be, what – you know, who the subcontractors are and so on and so forth.
So that is really the actual contract negotiation, which will have a firm dollar price. And when you put that firm dollar price, obviously, it will have to accommodate all the issues of liability that currently, you know, remain a source of liability for American companies.
MR. TELLIS: (Off mic) – global companies and Indian companies as well.
Q: Hi. Ashley, there was a White House briefing in the morning, and we asked them this question about if they expect to sign kind of an agreement or announce one on the civilian Indian Early Works, and there seems to be uncertainty too, and, I thought you were reflecting, too, when you said that an announcement is possible or an agreement may be signed. So there is still uncertainty, and why is there – (inaudible) – even after the cabinet has cleared it, so are there still problems on this front – (inaudible) – nuts and bolts issues to be addressed?
MR. TELLIS: Well, I mean, if you look at the record of U.S-India negotiations on civil nuclear issues, you know, all the breakthroughs have occurred literally at the last minute before the principals, you know, have to announce it. I don’t think there are, you know, unnegotiable (ph) issues. I mean, I don’t think there’s anything that, you know, prevents this from happening. What made it difficult was simply the timing that many of the pieces of information that have to be exchanged were exchanged rather late (in the day ?) between the two sides, and so I think that may have caused some of the uncertainty – (inaudible) – bureaucratic uncertainty about whether, you know, the business could be completed in time. I am optimistic that they will do this, but I cannot imagine that this visit will pass without some acknowledgment that the Early Works is either ready to be announced or, you know, will follow shortly.
Q: Also, a related question on the same issue. Now, what’s going to happen next? Is it one of the contracts between the two governments or between Westinghouse and NPCIL?
MR. TELLIS: Well, this would actually be a contract between Westinghouse and NPCIL, because the U.S. government is not in the business of (selling ?) reactors. Westinghouse manufactures the reactors, and Westinghouse will – you know, this is a private deal between two entities. Now, NPCIL is an odd entity because it is a wholly-owned, you know, subsidiary of the government of India. So in some sense, the government of India is implicated, but NPCIL will be signing the contract directly with Westinghouse.
Q: In terms of defense market, what kind of an investment can be expected by U.S. companies in India in next 10 years?
MR. TELLIS: It all depends on how India treats U.S. defense companies in terms of its own regulations and its investment levels. As long as FDI and defense is capped at 26 percent, I don’t think U.S. companies will take the initiative to make major investments in India. But if the FDI caps are liberalized upwards, then I think you will begin to see a process.
Now, there is already some investment occurring because of the offsets requirements, but if you want to see real, major investments by U.S. companies in India, then I think you have to have an increase in FDI levels. You cannot have FDI levels capped at 26 percent and expect that U.S. companies will make big investments in India.
Q: Hi, this is Lalit Jha from PTI here.
MR. CARVER: OK, please go ahead.
Q: Thanks for doing this. On the visit itself, how do you see – what are the outcomes – could be the outcomes on Friday afternoon, and secondly, since Modi has not been given the visa, what impact this could have on bilateral relationship when – if he becomes the prime minister after the elections?
MR. CARVER: Milan, why don’t you have a go?
MR. VAISHNAV: Yeah, I think on the Modi issue – I mean, I do think that one of the things this government hopes to do with this visit is demonstrate implicitly the contrast between themselves and the BJP, because after all, their projected prime ministerial candidate can’t even enter this country. And so, by having the prime minister come and the U.S-India being sort of his crowning achievement, there is a kind of imagery that they’re, I think, gleefully bandying about.
But I do think, as we said before, if Modi is, in fact, the prime minister come next year, I don’t think that – I think he will be allowed to come to the U.S. I think that the U.S. will have normal bilateral relations. I think the section of the statute under which he was denied a visa does not apply, as far as I understand it, to heads of government. And so that, as a practical matter, isn’t an issue. And if you speak with U.S. government officials both in Washington and in India, they have, you know, through our consul general’s office in Mumbai, been meeting with Modi. They’ve sent a delegation to his annual Vibrant Gujarat Summit, and so there has been increased engagement, I would say, over the past 12 to 18 months, and so those things are happening, although they aren’t, you know, making the headlines behind the scenes.
Q: The outcome of the visit on Friday? How do you see it?
MR. CARVER: What sort of outcomes do you think there will be? Ashley, do you have any thoughts on that?
MR. TELLIS: Well, I think the biggest outcome is that both sides will recommit themselves to sustaining the partnership that they have built. I mean, as you know, there has been a constant complaint in the last several, you know, years that the relationship has plateaued, and there is an element of truth to that, but the fact of the matter is, the relationship has also come, you know, a long distance from where it was, you know, in 1998.
And I think for both the president and the prime minister, this will be an opportunity to, you know, tell the international community that this is a relationship that is valued by both. I mean, India telling the United States that, you know, what happens here matters for Indian interests and the United States telling India that India’s growth, India’s success is important, you know, to the United States.
So I think there will be an affirmation of the importance of the relationship by both sides, and if all goes well, then you will get some of these, you know, things that we’ve talked about in this conversation – something on civil nuclear, something on trade, something on defense, something on climate change. You know, but that’s really in the details.
MR. CARVER: Milan?
MR. VAISHNAV: Yeah, I mean, I would just add to that – I mean, I think this is a very workman-like visit, and aside from this civil nuclear issue, I don’t expect there to be any massive announcements. But I do think it’s an opportunity – and both sides have emphasized this – for both parties to have a frank and open dialogue on the economic side where both parties have grievances, so on the Indian side, they are very bothered by the Senate version of the immigration reform bill, which places a cap on H-1B visas, which would cause real damage to Indian IT companies who are working in the U.S.
On the flip side, U.S. business in the private sector is increasingly agitated by what they see as moves towards protectionism, legal and regulatory changes that make the investment climate less attractive rather than more attractive, and so I’ve actually seen some positive signs from the Indian government in the past six or 12 months, but I think there’s a long way to go, and I think one of the things that will be on the agenda is having an exchange about what can be done by both sides on the economic side, because after all, that really has been, I think, the major driver of this relationship, and will continue to be for the foreseeable future.
MR. CARVER: OK. We’re at 12:30, so I think we’re going to need to wrap it up. As we said, there are obviously many, many issues to this relationship that we could continue to talk about... but thanks very much for joining. Thank you Ashley, thank you Milan.